Electronic Signature — Part I: Challenges and Business Justification

This article - the first in a two part series - looks at the successes some banks have had with e-signature adoption and examines some of the remaining barriers regarding regulation and organizational silos that still exist in adopting e-signatures in the financial services sector.

A recent Capco white paper
discussed the Paperless Transformation continuum and the fact that such a major undertaking occurs over time, is driven at the enterprise level and can be composed of several elements (technology-driven or not) that come into play. One of the most critical and influential of these elements is electronic signature, or simply e-Sig.

Driven by wide adoption of electronic commerce, the impetus to reduce physical paper, and — most importantly — the need to speed up processes (e.g., lending in the financial services space), electronic signature has seen increased adoption rates over the last few years. Recent legislature (ESIGN Act, the Uniform Electronic Transactions Act - UETA) aimed at eliminating certain legal, compliance and security concerns has made the proposition even more appealing. However, up until recently financial institutions had some of lowest e-signature adoption rates.

Banks were not ready to embrace e-signatures until courts and regulators provided their stamp of approval, and existing technologies could not — for the most part — accommodate electronic signage. In the meantime, retailers were starting to introduce signature pads at the point of sale, and the physical imprint of the credit card (with the accompanying ink signature) was becoming a thing of the past.

Roughly 10 to 12 years ago, when the aforementioned legislation was passed, the proverbial floodgates started to open. Legislation now allows entities to accept electronic documents and signatures as official records. Legal departments are no longer a roadblock. Websites and apps on tablets or mobile devices now include the ubiquitous “I Agree” button for disclosures and signage. And the service providers in this space (led by DocuSign, Silanis, AssureSign and Adobe, among myriad others) have gotten so good at this that an electronic signature
is now more secure
and fraud-proof than its ink predecessor1,2.

According to an industry study recently published
by Gartner, the overall market for e-Sig software and services has grown by 48 percent between 2010 and 2011, with the same growth rate expected in 2012 and beyond. Clearly, e-Sig is not only here to stay, it’s poised for tremendous growth in the near future. But with this type of growth, there are clearly challenges and a considerable number of questions — both business- and technology-related — that have to be addressed.

We are seeing isolated instances of electronic signage occurring in the industry, mostly at the channel or product level, but what is driving banks to espouse it on larger scale? What are the benefits? What are the roadblocks?

First, internal drivers — reduced paper and associated transportation costs, return on investment (ROI) from shortening transaction times and increased security around record keeping — are leading financial institutions to adopt e-signature. Recent industry success stories cite millions of dollars being saved in administrative paper-related processes, 75 percent reduction in error rates
, 85 percent reduction in shipping costs, and 80 to 90 percent adoption rates
. When all is said and done, it’s a win-win proposition for both financial institutions and their customers. As eye-popping as these metrics are, though, the main driver for e-Sig gravitates toward the customer experience.

Customers want and/or prefer electronic signature. Mobile technology, demographics and the expectation that everything should happen (almost) in real time are driving e-Sig adoption across the marketplace, and in particular within financial services. Most banks have either implemented or are in the process of launching this capability across multiple products, channels and lines of business. It’s unavoidable, and if you’re only in the planning stages of adopting this technology, expect to lose some customers to the e-Sig-enabled competition.

The ROI for e-Sig reaches across several categories: mailing and transportation savings (some banks are cutting their costs by as much as 85 percent); FTE savings associated with the elimination of manual processes (mail sorting, document handling, scanning, etc.), which typically result in 70 to 80 percent improved efficiencies; error reduction (more than 50 percent of the non-electronic applications require rework due to missing signatures or incomplete forms); reductions in actual paper costs; and so on. Then there are the “soft benefits” associated with the overall improved customer experience, reduced cycle times, improved compliance and environmental impact, just to name a few.

Clearly, the overall benefits are significant. Some institutions that have recently implemented e-Sig capabilities have experienced cycle times reduced from weeks to days or from days to hours, shipping cost savings by up to 80 percent, error rates reduced to less than 5 percent, and investments that paid off in less than two years! If this is the case, why isn’t everyone jumping at the bit to implement e-Sig? As with most technological advancements, barriers, both internal and external, exist.

Some internal barriers Capco has seen originate within legal departments — either because they don’t understand the technology or they see too much risk exposure in this approach (incidentally, authentication, attribution, digital certificates and overall security of the process are very solid with most of the market-leading vendors). Some other factors include regulatory guidelines that aren’t universal at this point (which make it more difficult for global entities to launch one solution across the enterprise), processes where documentation can be eventually distributed outside of the organization (e.g., loans that are repackaged and sold), and overall confusion around the appropriate tools to use —enterprise content management (ECM), business process management (BPM) or e-form-generating tools could interface with an e-Sig application. The challenge is to develop a strong architecture that accommodates a true enterprise approach.

Adrian Ungureanu is a principal consultant, and Tony Tummillo is a senior consultant, at Capco.